Stereotyping and Marketing: Out-Group Homogeneity Bias and Entry to Competitive Markets
Marketers seeking to understand diverse customers risk using stereotypes. That market forces will deal with the problem of stereotyping may be an overly strong assumption and so we ask: (1) How might OGHB impact a marketing decision? And (2) are the effects of this likely to persist in markets, i.e., does it matter? Our research combines the psychology of prejudice with game theory to model competitive market outcomes. We model marketers relying on stereotypes—technically experiencing out-group homogeneity bias (OGHB); the tendency to perceive out-groups as less varied simply because we are unable to identify with them. Our core finding is that in competitive market entry OGHB can have negative consequences for the competitor of those experiencing the bias. This comes from a reduction in the value of the market, rather than any gains made by those employing stereotypes. Bias resembles a negative externality and non-market efforts to reduce stereotyping may be in the interests of not just consumers but also the competitors of those using stereotypes.
KeywordsOut-group homogeneity bias Market entry Behavioral game theory Strategic marketing Analytical methods
The first author would like to thank the Institute for the Study of Business Markets at Penn State for the financial support of this research.
Compliance with Ethical Standards
Conflict of Interest
On behalf of all authors, the corresponding author states that there is no conflict of interest.
- 1.Ritson M (2017) Only crap marketers mistake stereotypes for segments. Mark. Week July 26Google Scholar
- 12.Nyren C (2007) Advertising to baby boomers. Paramount Market Publishing Inc, IthacaGoogle Scholar
- 13.Thompson T (2008) Hitting the niche within the niche: Hispanic market is not one big homogenous culture. Advert Age April 22Google Scholar
- 14.Gavette G (2013) Why nauseating diamond ads are here to stay. In: Harvard Bus Rev Blog https://hbr.org/2013/02/why-nauseating-diamond-ads-are/ . Accessed 12 Dec 2015Google Scholar
- 15.Dockus K (2015) What women want: effectively marketing to women. In: DiversityBuisness.com. http://www.diversitybusiness.com/news/diversity.magazine/99200829.asp. Accessed 12 Dec 2015
- 16.Advertising Standards Authority (2017) Depictions, Perceptions and harm: a report on gender stereotypes in advertisingGoogle Scholar
- 17.McNamara T, Descubes I (2017) Why marketing targeted at gay and lesbian consumers often misses its mark. Mark MagGoogle Scholar
- 18.Lyris (2012) 2012 Lyris digital optimizer report. LyrisGoogle Scholar
- 19.Banaji MR, Greenwald AG (2013) Blindspot: hidden biases of good people. Delacorte Press, New YorkGoogle Scholar
- 20.Friedman M (1953) Essays in positive economics. University of Chicago Press, ChicagoGoogle Scholar
- 23.Alchian AA (1950) Uncertainty, evolution, and economic theory. J Polit Econ 58(3):211–221Google Scholar
- 29.Schelling T (1980) The strategy of conflict, 2nd edn. Harvard University, CambridgeGoogle Scholar